Maharashtra Legislature ratifies GST Constitutional Amendment Bill

Mumbai: The Maharashtra Legislature on Monday unanimously ratified the Goods and Services Tax Constitutional Amendment Bill, joining a clutch of states which have already
approved the legislation that will pave the way for roll-out of a single and unified tax system in the country.

Both Houses of the legislature met for a special one-day session to approve the Constitution (122nd Amendment) (Goods and Services Tax) Bill, passed by Parliament earlier this month, during which Opposition and treasury benches traded charges.

Maharashtra, an economic powerhouse, became the 10th state to ratify the crucial legislation, billed as the biggest tax reform since Independence.

Before unanimous ratification, during a discussion Congress and NCP-led opposition targeted Prime Minister Narendra Modi for his resistance to the same Bill in 2011 when he was the Gujarat Chief Minister.

Chief Minister Devendra Fadnavis sought to allay fears pertaining to the new tax regime expressed by some parties.

Replying to a debate in the Council, he said under the new law, the state is empowered to set aside tax revenue or allocate funds from its consolidated funds to civic bodies like the Brihanmumbai Municipal Corporation (BMC).

Under GST, octroi will be abolished, depriving BMC of a key source of revenue.

Maharashtra Chief Minister Devendra Fadnavis. PTI

Referring to apprehensions expressed by Shiv Sena, Congress and NCP about impact of GST on BMC's octroi revenue, Fadnavis said, "Octroi is paid to BMC by the rest of the State as petroleum companies do not pay the same. Now the tax shall first come to the state, which in turn, will pass it on to the BMC."

Fadnavis said the state government and the BMC can set up an institutional mechanism for devolution of taxes.

Rebutting Opposition charge against PM, he contended Modi, the then Gujarat Chief Minister, opposed the Bill brought by the Congress-led UPA government as it provided compensation to states for first three years only (for loss of revenue) and that too in 100, 75 and 50 per cent ratios.

"Modi (as Prime Minister) ensured the Centre gave 100 per cent compensation to states and that, too, for first five years."

He maintained it was at Modi's instance the clause of arbitration by a Supreme Court judge on disputes in the GST Governing Council was removed, upholding the supremacy of Parliament.

The Chief Minister said Modi had opposed including the tax rate structure in the Constitutional Amendment Bill as it would have meant the Government having to move Parliament each time changes had to be made in structure of the levy.

"Under the proposed law both the States and the Centre can levy service tax. The proposed law will eliminate the prospect of double taxation," Fadnavis said.

Referring to the electronic process of taxation and equal distribution of taxes between the Centre and States, he said now the former cannot deny the latter's dues.

The law will eliminate the scourge of tax theft, he said, adding while the state's revenue from VAT was estimated Rs 80,000 crore, nearly Rs 30,000 to Rs 35,000 of it was lost due to tax evasion.

On the clause of three-fourth majority needed in the GST Governing Council for ratification of tax proposals, he said the Centre cannot now force States to toe its line.

Earlier, replying to the debate, Minister of State for Finance and Planning Deepak Kesarkar said the proposed law will boost the state's Gross Domestic Product by 1.5 to 2.5 per cent and attract more Foreign Direct Investment (FDI).

Kesarkar said the proposed legislation will also cover people left out of the tax regime.

Initiating the debate, Leader of Opposition Dhananjay Munde of NCP said care must be taken to ensure the state does not suffer financially once GST comes into force.

"The state stands to face a loss of Rs 25,000 to Rs 30,000-crore revenue. The proposed law will lead to fiscal collapse of civic bodies and put burden of inflation on to the common man and the poor," Munde said.

"Modi, as Gujarat CM, opposed the Bill brought by the UPA Government. The BJP should now concede its stand was not in national interest then," he added.

Neelam Gorhe (Shiv Sena) demanded an assurance from the Government that the autonomy of civic bodies would be kept intact under the new tax regime.

She said the 14th Finance Commission has called for giving greater financial powers to local self-governing bodies. Gorhe demanded the proposed law provide for direct financial compensation of Rs 7,000 crore for the first five years to BMC for revenue loss it shall incur.

"The BMC used to get revenue from 52 to 55 taxes which are now going to be abolished. The Government should set up a committee for consultations on the draft of the proposed state law for State GST (SGST)."

Finance Minister Sudhir Mungantiwar, who tabled the resolution to ratify the Bill in Assembly, said Maharashtra would not incur any losses after GST comes into effect.

Opposition Leader in Assembly Radhakrishna Vikhe-Patil said the ruling BJP should not claim credit for ushering in the GST era. Jayant Patil (NCP), a former Finance Minister, said "It is estimated around 80 per cent middle class people will bear the brunt of inflation after GST comes into force."

The landmark Bill needs approval by at least 16 state legislatures before it could be sent for Presidential assent and subsequent setting up of GST Council which will decide the new tax rate and other issues.